Welcome to The Property Perspective, our fortnightly note on what we are seeing in the market and what we think is worth your attention.
This issue, we wanted to unpack the recent federal budget changes for property investors and share our thoughts on what they may actually mean in practice. There has been a huge amount of noise and emotion around the announcement over the past few weeks, so we thought it was worth stepping back and focusing on the bigger picture.
Callum & Lucas
The federal budget announced on 12 May introduced two major changes for residential property investors.
From 1 July 2027, negative gearing will be limited to new builds only. Investors purchasing established properties after 7:30pm on 12 May 2026 will no longer be able to offset rental losses against their personal income. Those losses can still be carried forward and applied against future rental income or capital gains from the property itself.
At the same time, the current 50% capital gains tax discount is being replaced with an indexed system and a minimum 30% tax rate. Investors purchasing new builds will continue to retain access to the existing 50% discount.
These are meaningful changes and they will absolutely influence investor behaviour to some degree. But in our opinion, a lot of the commentary so far has jumped straight to worst case scenarios without properly considering the broader fundamentals that actually drive property markets over the long term.
The biggest thing that remains intact is leverage.
Property is still one of the very few asset classes where everyday Australians can borrow significant amounts of money against a physical asset and benefit from long term capital growth on the full asset value, not just their original deposit.
That ability to build equity, recycle it and continue compounding over time remains incredibly powerful. In our view, that has always been the real backbone of property investing. Tax incentives have helped along the way, but they were never the sole reason property performed strongly over decades.
It is also important to remember that these changes apply across multiple asset classes. Investors looking elsewhere still face capital gains tax changes, often without the same level of leverage or lending flexibility property provides.
One thing we think is often misunderstood in these discussions is the idea that the Australian property market moves as one.
It does not.
Every market has its own supply and demand dynamics, affordability levels, local economy, population growth and buyer profile. What is true for one suburb or city right now is not necessarily true for the next one.
The areas we are actively buying in continue to show strong underlying fundamentals. We are still seeing competition from both investors and owner occupiers for limited stock, particularly in markets where affordability remains attractive relative to local incomes.
That affordability piece matters. In many of these areas, local wages are still capable of supporting future price growth, creating a much stronger long term foundation than purely speculative demand.
Right now we are seeing two distinct types of investors.
The first group has a clear strategy and long term view, and they are continuing to move forward largely unaffected by the current headlines. The second group has paused and wants to see how things unfold before making their next move.
Both positions are understandable.
What we do believe, however, is that supply remains the single biggest structural issue in Australian property and that is not changing any time soon. Build costs remain elevated, housing delivery continues to lag population growth and further tighten supply in certain markets.
At the same time, we would not be surprised to see some investors shift away from expensive metro markets with very low yields and towards more affordable markets/asset types where cash flow and holding costs remain more manageable.
Final thoughts
The biggest thing we continue to watch is supply.
Build costs remain elevated, housing delivery continues to lag population growth and many markets still have very limited available stock. In our view, that supply and demand imbalance remains one of the strongest long term drivers for well selected property.
More than ever, market selection matters. The focus needs to remain on areas where affordability still exists, local incomes support future growth and long term demand drivers remain strong.
As Warren Buffett put it: be fearful when others are greedy, and greedy when others are fearful.
Until next fortnight,
Callum & Lucas